Attorney & Mediator
Attorney & Mediator

Should you name your parents as beneficiaries?

For most people, this idea might seem unusual.  After all, in the general scheme of things, parents will die first.

For individuals with minor children, this should not be a strong consideration as the primary focus of your estate plan is to provide for your children in the event that you are no longer here to care for them.

For people whose children have grown, or for individuals without children, this issue may deserve a stronger consideration depending on family dynamics and economics.

If your parents are individuals without significant assets and are “getting by” on their social security and a small savings, they may run out of assets in the event of a lengthy medical event.  Additionally, while those without assets can apply for Medicaid for Nursing Home costs, that doesn’t hold true if an elderly parent needs assisted living.

If the time comes that your parents can no longer live independently at home, but are not eligible or appropriate for a skilled nursing home care, they may require assisted living.  The problem is that this is a pay as you go system.  What if they do not have the resources to afford assisted living?

If all of their children are alive and doing well, the children may decide to assist their parents financially by each contributing a monthly amount, thereby permitting the parents to live in assisted living.  What happens, however, if you are contributing to your parents’ assisted living costs and your predecease them?  Or perhaps, they are not yet at the point of needing assisted living, but could very well require it in the future.  If you die first, they will not have the support they may need when the time comes.

This could be a good reason to include your parents as beneficiaries in your trust.  The money could be structured so that it would include assisted living expenses during their lifetimes; however, the money if not used during their lifetimes would then flow to other beneficiaries.

This is a concept which should be discussed at a family meeting of all the siblings.  The key is that with proper planning, your parents’ needs will be met while you are also addressing the needs of your own family.

Estate Planning – Have you checked your beneficiaries lately?

As people come in to begin their estate planning, one of the issues we take a look at is whether they have beneficiary designations in place for any of their insurance, IRA’s or other assets.

What we often find is that these beneficiary designations were made years ago and have not been updated to reflect current choices.

For Life Insurance – pull out those policies and look to see who you named as the beneficiary.   Is it your ex-spouse? Your parents (prior to marriage)? Your parents (even though you now have adult children)?

People often forget this important issue when they have life changing events. Often after the death of a spouse, the survivor will update many things, but forget to change the beneficiaries on life insurance and IRA’s. Sometimes when a beneficiary dies, we are too overcome with grief initially to address this legal issue; then life moves forward and we forget.

Unintended consequences can result if we forget to address this issue. Life insurance is a contract and it passes outside of your Will or Trust. It is not controlled by the provisions of those estate planning documents.

If you pass away and your ex-spouse is on your life insurance, he or she will get a remarkable bonus that was unexpected and unintended.

If you pass away and your parents are still named as beneficiaries, they get the money, even if your spouse and children need the money. If your parents have passed away, the insurance company may insist on making the check payable to your parent’s estate. In that case, an estate will have to be opened in Probate Court simply to process this check, years after they have passed away.

Don’t permit unfortunate consequences to occur – check your beneficiary designations today – make certain that the right people will receive the amounts you intended.